– National Homes Prices Almost 50% Higher Than March 2011 Bottom
– Four of the Top 10 Markets Considered Overvalued
– Unsold Housing Inventory is Lowest for Any Q2 in Over 30 Years
– Tight Inventory Driving Out Affordability
CoreLogic released its CoreLogic Home Price Index (HPI) and HPI Forecast for June 2017 which shows home prices are up strongly both year over year and month over month. Home prices nationally increased year over year by 6.7% from June 2016 to June 2017, and on a month-over-month basis, home prices increased by 1.1% in June 2017 compared with May 2017,* according to the CoreLogic HPI. Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 5.2% on a year-over-year basis from June 2017 to June 2018, and on a month-over-month basis home prices are expected to increase by 0.6% from June 2017 to July 2017. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state. “The growth in sales is slowing down, and this is not due to lack of affordability, but rather a lack of inventory,” said Dr. Frank Nothaft, chief economist for CoreLogic. “As of Q2 2017, the unsold inventory as a share of all households is 1.9%, which is the lowest Q2 reading in over 30 years.”
Of the nation’s 10 largest metropolitan areas measured by population, four were overvalued in June according to CoreLogic Market Conditions Indicators (MCI) data. These four metros include Denver-Aurora-Lakewood, CO, Houston-The Woodlands-Sugar Land, TX, Miami-Miami Beach-Kendall, FL and Washington-Arlington-Alexandria, DC-VA-MD-WV. By comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals such as disposable income, the MCI categorizes home prices in individual markets as undervalued, at value or overvalued. Because most homeowners use their income to pay for home mortgages, there is an established relationship between income levels and home prices. The MCI defines an overvalued market as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued market is one in which home prices are at least 10% below the sustainable level. “Home prices are marching ever higher, up almost 50% since the trough in March 2011. With no end to the escalation in sight, affordability is rapidly deteriorating nationally and especially in some key markets such as Denver, Houston, Miami and Washington,” said Frank Martell, president and CEO of CoreLogic. “While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.”
US adds fewer private sector jobs than expected in July: ADP
US private employers added 178,000 jobs in July, below economists’ expectations, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 185,000 jobs, with estimates ranging from 151,000 to 225,000 jobs added. Private payroll gains in the month earlier were revised up to 191,000 from an originally reported 158,000 increase. The report is jointly developed with Moody’s Analytics. The ADP figures come ahead of the US Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. Economists polled by Reuters are looking for US private payroll employment to have grown by 180,000 jobs in July, down from a gain of 187,000 the month before. Total non-farm employment is expected to have increased by 183,000. The unemployment rate is forecast to tick down to 4.3% from the 4.4% recorded a month earlier.
Anthem to cut back Obamacare plan offerings in California
– Anthem is pulling back from 16 of 19 pricing regions in California where it offered Obamacare options this year, state officials said on Tuesday.
– The move, which takes effect for 2018, means Anthem will offer Obamacare coverage in three pricing regions comprising 28 counties in California.
US health insurer Anthem is pulling back from 16 of 19 pricing regions in California where it offered Obamacare options this year, state officials said on Tuesday. The move, which takes effect for 2018, means Anthem will offer Obamacare coverage in three pricing regions comprising 28 counties in California. That is just 41% of its current enrollment, or about 108,000 consumers, leaving some 153,000 consumers without Anthem Obamacare options, state officials said. “The market for these plans has become unstable. And with federal rules and guidance changing, it’s no longer possible for us to offer some of those plans,” Brian Ternan, president of Anthem Blue Cross of California, said in a statement on the company’s website. US President Donald Trump on Monday threatened to cut off subsidy payments that make the plans affordable for lower income Americans and help insurers to keep premiums down, after efforts to repeal the law signed by his predecessor, President Barack Obama, failed in Congress. Trump has repeatedly urged Republican lawmakers to keep working to undo Obama’s Affordable Care Act
MBA – Mortgage Applications Decrease in Latest MBA Weekly Survey
Mortgage applications decreased 2.8% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 28, 2017. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3% compared with the previous week. The Refinance Index decreased 4% from the previous week. The seasonally adjusted Purchase Index decreased 2% from one week earlier to its lowest level since March 2017. The unadjusted Purchase Index decreased 2% compared with the previous week and was 9% higher than the same week one year ago. The refinance share of mortgage activity decreased to 45.5% of total applications from 46.0% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.6% of total applications. The FHA share of total applications increased to 10.3% from 10.2% the week prior. The VA share of total applications decreased to 10.1% from 10.5% the week prior. The USDA share of total applications remained unchanged at 0.8% from the week prior.
NAR – realtors report finds 11% increase in commercial member income, 19% increase in sales transaction volume
Commercial real estate markets continue to improve, with Realtors® specializing in commercial real estate reporting both an increase in member’s gross income and sales volume, according to the National Association of Realtors (NAR) 2017 Commercial Member Profile. The annual study’s results represent Realtors, members of NAR, who conduct all or part of their business in commercial sales, leasing, brokerage and development for land, office and industrial space, multifamily and retail buildings, as well as property management. “There has been an uptick in Realtor® members who choose to specialize in commercial real estate at the same time as commercial professionals report improvements in the market and their business activity,” said 2017 NAR President William E. Brown, a Realtor® from Alamo, California. “A stronger commercial market is a good indicator of a growing economy, so the outlook is positive for commercial members in the year ahead.” The median gross annual income for commercial members in 2016 was $120,800, an increase from $108,800 in 2015. Brokers and appraisers tend to report the highest median annual incomes, while sales agents report the lowest among licensees. Those with less than two years of experience reported a median annual income of $31,500 in 2016, down from $43,400 in 2015; members with more than 26 years of experience reported a median annual income of $162,200 in 2016, down from $165,400 in 2015. Commercial members completed a median of eight sales transactions in 2016, a decrease of one since 2015. A quarter of commercial members reported having one to four transactions, and 27% reported having more than 20 transactions. While the number of transactions decreased slightly in 2016, the sales volume increased again this year. The median sales transaction volume in 2016 among members who had a transaction was $3,500,000, an increase from $2,931,000 in 2015. Only 7% of commercial members reported not having a transaction at all, which decreased from 8% in 2015. The median years of experience in real estate increased to 24 years in 2017, up from 20 years in 2016, as did the median years of experience of members in commercial real estate – up from 15 years in 2016 to 19 years in 2017.
Forty-seven% of NAR’s commercial members are brokers, and 30% are licensed sales agents, consistent with last year. Seventeen% of commercial members have a broker-associate license while appraisal license holders account for 5%, also consistent with last year. The median age of commercial members remained the same as last year, at 60 years old. Almost three out of four commercial members are male, identical to last year’s results. Men reported being active in any real estate capacity for a median of 25 years and in commercial real estate for a median of 20 years, the same as last year. Women have been active in real estate for a median of 19 years (up from 14 years last year) and in commercial real estate for a median of 15 years (up from 11 years last year). Commercial members who manage properties typically managed 82,000 total square feet, representing 15 total spaces, up from 50,000 square feet and 17 spaces in 2015. Those who manage offices typically managed 25,000 total office square feet, representing seven total offices, up from 20,000 office square feet and five offices last year. Thirty-three% of commercial members were involved in international transactions in 2016, down 2% from 2015. Eighteen% of commercial members reported an increase in international transactions, while only 1% had a decrease. Sixty-five% (up from 60% in 2016) of respondents are members of any of several commercial affiliated institutes, councils, or societies. These commercial organizations include the CCIM Institute, the Institute of Real Estate Management, the Counselors of Real Estate, the Realtors Land Institute and the Society of Industrial and Office Realtors.
MBA – commercial/multifamily borrowing up 20% year-over-year
According to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, second quarter 2017 commercial and multifamily mortgage loan originations were 20% higher than during the same period last year and 28% higher than the first quarter of 2017. “Borrowing and lending backed by commercial and multifamily properties has been strong the first half of this year,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Reflecting broad industry trends, borrowing backed by industrial properties increased by two-thirds compared to the first half of 2016, while borrowing backed by retail properties dropped by one-sixth. As was the case during the first quarter, commercial/multifamily mortgage bankers’ originations increased despite a slowdown in the volume of sales transactions.” A rise in originations for industrial and office properties led the overall increase in commercial/multifamily lending volumes when compared to the second quarter of 2016. The second quarter saw a 91% year-over-year increase in the dollar volume of loans for industrial properties, a 33% increase for office properties, a 21% increase for multifamily properties, a 14% increase for hotel properties, a 7% increase in health care property loans, and a 9% decrease in retail property loans. Among investor types, the dollar volume of loans originated for Commercial Mortgage Backed Securities (CMBS) loans increased by 168% year-over-year. There was a 26% year-over-year increase for Government Sponsored Enterprises (GSEs – Fannie Mae and Freddie Mac) loans, a 2% decrease in life insurance company loans, and a 21% decrease in the dollar volume of commercial bank portfolio loans. Second quarter 2017 originations for hotel properties increased 139% compared to the first quarter 2017. There was a 39% increase in originations for industrial properties, a 39% increase for office properties, a 34% increase for retail properties, a 25% increase for multifamily properties, and a 34% decrease for health care properties from the first quarter 2017. Among investor types, between the first and second quarter of 2017, the dollar volume of loans for CMBS increased 117%, loans for life insurance companies increased 25%, originations for GSEs increased 22%, and loans for commercial bank portfolios decreased by 5%.
NAHB – Cantwell-Hatch Bill would help ease affordable housing crisis
The National Association of Home Builders (NAHB) today called on Congress to pass the Affordable Housing Credit Improvements Act of 2017 (S. 548), legislation that would promote the construction of sorely needed rental apartments and help alleviate the nation’s affordable housing crisis. Testifying before the Senate Finance Committee, NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas, told lawmakers that it is essential to increase the resources supporting housing production in order to meet the growing need for affordable rental housing. “S. 548, a bipartisan bill championed by Sens. Maria Cantwell (D-Wash.) and Orrin Hatch (R-Utah), takes a significant and needed step to boosting supply by increasing Low Income Housing Tax Credit (LIHTC) allocations by 50%,” said MacDonald. “Enacting this bill is expected to result in an additional 400,000 LIHTC units over the next 10 years. NAHB estimates that added construction would increase federal tax revenue by $11.6 billion and state and local revenues by $5.6 billion.” The number of renter households considered “severely cost burdened,” meaning they spend more than half of their monthly income on rent, is at an all-time high of 11.4 million, according to the Harvard University Joint Center for Housing Studies. In starker terms, that translates to more than one in four of all renters in the US “Fees, regulatory compliance, modern building and energy codes, building materials, land and labor costs determine whether a project is financial viable,” said MacDonald. “If we want to provide affordable rental housing for lower-income households, we cannot do so without a subsidy.”
This is why the LIHTC, a unique private-public partnership, is such an indispensable program. Since its inception, the program has produced and financed more than 2.9 million affordable apartments for low-income families, seniors and individuals with special needs. Moreover, the tax credit is an important job creator, generating approximately $7.1 billion in economic income and roughly 95,000 jobs per year across many industries. The Affordable Housing Credit Improvements Act would further promote the construction of affordable housing throughout the nation by making permanent the 4% credit rate for acquisition and bond-financed projects, which would provide more certainty and flexibility in financing these properties. In addition, the legislation would allow energy tax incentives to be used in combination with LIHTCs and help combat local opposition to affordable housing projects by prohibiting local approval and contribution requirements. “The nation lacks enough affordable housing for hard-working families,” said MacDonald. “The only effective long-term solution is to increase supply. Passing this bipartisan legislation would greatly enhance our ability to meet the growing demand for more affordable rental units.”